With the government allowing foreign multi-brand retail chains to pick up to a 51% stake in Indian firms and tweaking the local sourcing norms for single-brand retailing, where it had earlier allowed 100% foreign direct investment (FDI), US-based Walmart and Swedish furniture retailer Ikea could be the first ones to set up shop in India.
Bharti Enterprises, which currently has a 50:50 joint venture with Walmart for cash-and-carry stores (back-end wholesale stores), is now set to initiate talks with the latter for investments in front-end stores.
Enthused by the green signal to FDI in multi-brand retail, Rajan Bharti Mittal, vice-chairman and joint managing director of Bharti Enterprises, told FE that it is a natural progression to initiate talks with Walmart for investment in Bharti Retail.
“We will definitely get into discussions with Walmart for investments in Bharti Retail now,” said Mittal. “It is a natural progression of our partnership in the back-end retail infrastructure. We were the first to bring Walmart into the country and our target of opening 15 cash-and-carry stores by 2015 has already been achieved. This best signals how strong our partnership is going and, therefore, talks of investments in front-end stores is a now a natural corollary. It is logical,” Mittal told FE.
Meanwhile, Ikea has already announced its plan to invest R10,500 crore to set up its own single-brand stores in the country provided the 30% mandatory local sourcing norms were tweaked.
On September 14, while approving FDI in multi-brand retail, the Cabinet also modified the norms for single-brand retail if foreign companies want to set up 100% subsidiaries in India.
For instance, it approved important amendments including the proposal where the requirement of 30% mandatory sourcing from Indian medium and small-scale enterprises has been waived for those retail brands whose products cannot be sourced from such industries. The government has also relaxed the norms for firms under single-brand retailing by allowing them to set up two entities – one that will execute single-brand retailing in which FDI will come and the other entity for sourcing of local products from SMEs. With these two crucial amendments, sources said, Ikea's application will